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New and Improved Strategies to Combat Patent Trolls

December 17, 2015

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Non-practicing entities or, more pejoratively, patent trolls, are companies that do not create their own products, but generate revenue solely by licensing patent portfolios and asserting patents in litigation. Typically they rely on overbroad interpretations of their patents. A decade ago, companies that were hit with lawsuits by patent trolls had few options other than paying licensing fees or engaging in protracted and expensive federal court litigation. The landscape has changed considerably over the past few years, and companies battling patent trolls now have a wide range of new strategies that can be used to respond to letters from patent trolls and defeat patent infringement suits. 

Abstract Ideas Not Patentable. Many of the perceived abuses of the patent system can be traced back to the issuance of broad patents directed to software and the internet after the year 2000. The law at that time placed few restrictions on the types of inventions that were eligible for patents. In 2014, the Supreme Court issued its decision in Alice Corp. v. CLS Bank, which narrowed patent eligibility considerably. In particular, abstract ideas that are implemented on a computer or over the internet are now routinely found invalid by district courts.

Expanded PTO Review. The America Invents Act, passed by Congress in 2011 as the most sweeping patent reform legislation since 1952, created several new kinds of proceedings in the United States Patent and Trademark Office (PTO). Accused infringers can now challenge patent validity through an expanded inter partes review process, covered business method patent review, and post grant review proceedings. These proceedings are designed to be relatively fast and inexpensive hearings in the PTO, as compared to full-fledged district court litigation that may take several years.

Attorney Fees. Having no business or assets other than the patents, patent trolls typically have very little at risk in pursuing litigation. The only real risk is that a district court will order them to pay the attorney fees of the defendant. Previously, it was extremely difficult for an accused infringer to receive an order granting it its attorney fees. But the Supreme Court recently lowered the standard, giving the district courts more flexibility in ordering patent trolls to pay the defendant’s attorney fees. A troll is now required to weigh that risk if it pursues a questionable case of patent infringement.

State Law. Patents are a creation of federal law, but numerous states are now taking action to protect their citizens against patent trolls. In 2013, Vermont became the first state to adopt legislation prohibiting a person from making a bad faith assertion of patent infringement. A victim of patent troll can file suit in state court seeking equitable relief, costs and fees, and actual and punitive damages. Since Vermont passed its bill, more than a dozen other states have passed similar legislation.

Pleading Standards. Until recently, patent holders could file a complaint for patent infringement in federal court without including any significant details on the nature of the accused infringement. Recognizing that the barrier to entry to the court system was too low, revisions to the Federal Rules of Civil Procedure went into effect on December 1 that will require any patent holder, including patent trolls, to plead alleged infringement with a higher degree of specificity. These changes will provide grounds to have ill-pled infringement complaints dismissed at the earliest stages.

Conclusion. The business model of patent trolls has taken a hit in recent years. Patent trolls will continue to seek royalties and enforce their patents in district court, but accused infringers now have added arrows in their quiver to defend against their claims. By either threatening or actually employing the new techniques, those accused of patent infringement can more effectively deal with patent trolls and their demands.


For more information, please contact:

Robert McFarlane

415-995-5072 Direct Phone
415-541-9366 Fax

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Russell Petersen

415-995-5816 Direct Phone
415-995-3530 Fax

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